Within the transaction process a litany of issues may arise that could prevent a deal from closing. According to Claudine Cohen, a principal in CohnReznick’s Transactional Advisory Practice, an unsophisticated seller could be one of the biggest pitfalls to a deal closing. And what defines an unsophisticated seller? According to Cohen, it is a seller that is not well-advised and not investing in the critical financial and accounting systems needed to help a buyer understand the seller’s business. With unsophisticated sellers (and buyers) often on one end of a deal, private equity firms can take steps to increase the certainty of close. They can be sure that the letter of intent (LOI) is specific in terms of purchase price, earn-out provisions, working capital target, and other areas. To further increase certainty of close, private equity firms can encourage transparency throughout the process, develop a trusted relationship with the target’s owners and management team and address sensitive topics early. Learn more about increasing the certainty of close in Private Equity Perspectives, a new video series from Mergers & Acquisitions magazine and featuring professionals from CohnReznick’s Private Equity and Venture Capital Industry Practice.
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